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Why Dionne Warwick Might Get Out of Paying $10M to the IRS

It costs a lot to be Dionne Warwick. The “Do You Know the Way to San Jose” songstress filed for bankruptcy through a federal court in her home state of New Jersey last week, claiming that while she brings in nearly $21,000 in monthly income, she spends all but $10 of it on expenses.

The documents also state that she only has $25,500 in assets and owes more than $10 million to the IRS. The need to file for bankruptcy, Warwick’s publicist Kevin Sasaki said in a statement sent to omg!, was thanks to “negligent and gross financial mismanagement” during several consecutive years in the 1980s and 1990s.

Though the actual overdue back taxes have been paid, according to Sasaki, Warwick owes the mind-blowing amount in accrued penalties and interest.

“In light of the magnitude of her tax liabilities, Warwick has repeatedly attempted to offer re-payment plans and proposals to the IRS and the California Franchise Tax Board for taxes owed. These plans were not accepted, resulting in escalating interest and penalties,” continued Sasaki.

Los Angeles-based bankruptcy attorney David L. Neale, who isn’t involved with Warwick’s case, but has studied her filing, tells omg! that it’s very likely the singer could walk away with a clean slate, since her tax obligations reach so far back that they would most likely be considered dischargable. Though other parties she owes could ostensibly sue her for payment, of the $10.72 million Warwick’s filing states she owes to creditors, only about $500,000 is owed to parties other than the IRS.

“That kind of tax liability suggests that there was a period when she was making a lot of money and through mismanagement or her own negligence didn’t pay her taxes. Now that her income has declined dramatically she’s dealing with this $10 million tax problem,” says Neale.

Warwick is far from the first celebrity to declare bankruptcy. Mike Tyson, Elton John, Willie Nelson, and Toni Braxton have all filed in the past, blaming their financial troubles on everything from overspending to bad investments to unscrupulous managers.

“There are no specific requirements to be a business manager,” Neale points out. “An artist can hire a friend or family member who doesn’t know what he’s doing or is dishonest and, by trusting that person, winds up with debts they don’t even know they owe.”